A money transfer agent on Jackson Avenue in Queens might seem like it’s a long way from Wall Street, But the Dodd-Frank Wall Street reforms will have a huge impact on the way the remittance industry operates. There is some disagreement between some experts and policymakers as to whether these reforms will be be an overall positive.

Until recently, no federal regulator had any authority over remittances. Individual states regulated remittance providers, but this had its own problems because the providers then potentially had to work with 50 different compliance procedures. Few states had regulations in place to protect consumers and some didn’t even require transfer agents to provide reciepts.

The law requires remittance providers to prominently post and frequently update fees and exchange rates for ‘model’ remittance amounts of $100 and $200. This is intended to facilitate comparison shopping for remitters.

Manuel Orozco, the director of the remittances and development program at the Inter-American Dialogue, sees some of the reforms as unnecessary. He agrees with the industry, whose representatives vociferously oppose the requirement to post price and exchange rate information. It also provides for a process for conflict resolution in the event that the remittance did not go through as promised.

“Disclosure of foreign exchange rates for money transfers is an essential feature of fair financial access for anyone, especially for low-income migrants, who regularly transfer money to their relatives. Is physical posting the solution? Most likely not. The challenge lies in finding adequate policy procedures that can mitigate speculation and abuse against clients without producing adverse effects on both the industry and its market.” Manuel Orozco, Inter-American Dialogue

In the Inter-American Dialogue’s newsletter, Orozco writes, “For one, the measure requires prominent daily postings of exchange rates and descriptions of model transfers of $100 and $200. However, exchange rates con- stantly fluctuate, posing accuracy and disclosure problems. Moreover, the use of a model transfer is no substitute for information on the actual transfer; it won’t properly inform the consumer about his or her real cost. In addition, the money transfer market has become increasingly competitive, offering low- cost transfers, where margins are significantly low—below 0.3 percent—and where the public rates businesses very high. In a 2008 survey, we found that less than 1 percent of customers believed companies are not transparent in the exchange rate. In addition, problems of exchange-rate disclosure are restricted to very few instances within the industry that can be solved without regulatory action. ”

The requirement to post prices might be ineffective in solving the problem of transparency, and might even lead to higher costs, as the postings would increase overhead for remittance agencies.

“We want to provide migrants with that sense of rediscovery, new meaning to their migration story,” says Francis Calpotura,the founder of TIGRA . “People want to know that their leaving hasn’t gone to waste, that they can contribute meaningfully. It strikes at the core of their reason for leaving.”

When a remitter sends money through a company that participates in Remit4Change, he or she can funnel a small portion of the remittance charge to the sustainable development program of their choice.

One project that TIGRA helped set into motion directed a small amount of remittance agency profits into helping rural Filipina women start a business to help sustain themselves. The women make and sell traditional fishing nets made from coconut husks. The initial capital that was needed to employ these 77 women was $100. Another project is establishing a women-run cooperative to make organic Mexican mole and salsa for export.

While there is some considerable disagreement as to whether the Dodd Frank Wall Street Reform and Consumer Protection Act’s mandate that remittance providers prominently post current exchange rates, there might be a better way to settle the problem of transparency.

Remás is a non-profit start-up that is developing technological tool to help educate migrants about their options.

The idea behind Remás is quite simple. It gives migrants a single place to compare prices of different remittance providers in their general area for no cost. The remitters can use either a computer or a mobile phone to compare the prices of different services and providers in a given zipcode. That way, migrants can compare money transfer prices as easily as one can compare the prices of books on Amazon.com.

The founder of Remás, Brendan McBride, became interested in remittances while he worked as a researcher in El Salvador and Brazil. He saw the enormous difference in living standards between families that benefitted from remittances and those that didn’t. It gave him the idea that if the cost of sending was reduced just a little bit, those benefits to people in developing countries could be magnified, and future generations would have less incentive to leave home to work.

“We’re trying to really bootstap together these tools for people to know all of their options in a sector of the economy that has had a shortage of information on what people’s options are.” -Brendan McBride, founder and executive director

The information that Remás will provide will be more accessible. It doesn’t force the remitter to walk all over town in search of the best price, and when remitters have the relevant information at their fingertips, the market can behave more efficiently and business will flow towards the most competitive provider.